Have you tried resetting the phone? By pushing and holding the Sleep/Wake and the Home buttons? If that didn't work, have you tried a restore?

giving that a try right now, im kinda trying to steer clear of a hard restore cause im going to just have to do it again when JB comes out for 3.1

Im still within my warranty, think its better to just get another phone? Im trying to think if its hardware or software.

EDIT---soft reset didnt work, its still showing the shutter closed....i can browse my camera roll so i know the screen works and you can see the camera on the button switch to horizontal mode when i lay it on its side.

You don't want to do a restore, but you are wondering if you should get a new phone? I would do the restore before swapping out the phone.

yes, cause if im going to restore and it doesnt work, im going to have to setup a new phone anyway, plus on top of that, obviously going to JB when redsn0w can do it. So that will be a third setup to do. Im trying to minimize the amounts of re-setups i have to do, cause it does take a while.

Also, if i restore the phone as new, will i lose my setup in iTunes? like my sync apps, contacts, etc etc. Or will it just stay there and let me re-sync on a fresh restore?

yes, cause if im going to restore and it doesnt work, im going to have to setup a new phone anyway, plus on top of that, obviously going to JB when redsn0w can do it. So that will be a third setup to do. Im trying to minimize the amounts of re-setups i have to do, cause it does take a while.

Also, if i restore the phone as new, will i lose my setup in iTunes? like my sync apps, contacts, etc etc. Or will it just stay there and let me re-sync on a fresh restore?

Really appreciate the reply...thanks

If you restore as new then yes, it will be just like a new phone where you have to setup everything from scratch... unfortunately.

Oh well, you needed to restore it anyway to take it in so... good luck to you..

ya...i called the Apple store and spoke to the guy there...told me that he has seen this ALOT with the 3G...seems to be a loose camera inside the phone itself. He confirms its N O T a software, but hardware issues.

Now...since my phone is hardware dead...you think they going to replace it or try to fix it?

i might just check out 3.1 since i can JB it anyway....but if they dont replace it i dont want to get stuck with 3.1

I don't know if they will fix it or replace it. It doesn't seem like something I would want to mess with to fix. Screens and batteries are doable because of their size. I would get on the horn to the store and ask. What they would do. If they replace the phone I doubt it will have 3.1 on it...

I had the same problem.Since my iPhone was out of the warranty period , I tried fixing it myself.
I opened my iPhone , and what I found was a loose connection between the camera and the motherboard.I removed all the screws , removed the motherboard and the camera,reconnected them back again and there it was , my camera was working.
Please take care of all the screws while opening the iPhone, as I lost one of the screws while opening it.

You just have to press the part where the camera is. They say that camera lens loosened out from its mother board. Just have to press with your 2 finger like sandwich and the camera will return to its position.